Re Tivway Ltd and Others

• Jurisdiction: Ireland
• Judge: Denham J.
• Judgment Date: 04 March 2010
• Neutral Citation: [2010] IESC 11
• Court: Supreme Court
• Docket Number: [S.C. No. 440 of
• Date: 04 March 2010

Tivway Ltd & Ors, In Re

In the matter of Tivway Limited (In Examination Under the Companies (Amendment) Act, 1990 )

And in the matter of John J. Fleming Construction Company

(In Examination Under the Companies (Amendment) Act, 1990 )

And in the matter of J.J. Fleming Holdings (In Examination Under the Companies (Amendment) Act, 1990 )

And in the matter of the Companies Acts, 1963 -2009

[2010] IESC 11

Murray C.J.

Denham J.

Hardiman J.

Geoghegan J.

Fennelly J.

[Appeal No: 440 of 2009]

THE SUPREME COURT

COMPANY LAW

Examinership

Scheme of arrangement - Creditor opposing scheme - Whether scheme could be approved - Whether court had jurisdiction to approve scheme of arrangement - Whether businesses capable of surviving as going concern - Nature of examiner - Purpose of legislation - Jurisdiction of court - Overall objective of schemes - Onus of proof on examiner - Sale of profitable assets - Holding company - In re Vantive Holdings [2009] IESC 68, (Unrep, SC, 11/8/2009) and In re Clare Textiles Ltd [1993] 2 IR 213 followed; In re Tuskar Resources plc [2001] 1 IR 668 considered - Companies (Amendment) Act 1990 (No 27), ss 2, 2(2) 24(1), 24(4) and 25 - Creditor's appeal allowed (440/2009 - SC - 4/3/2010) [2010] IESC 11

Re Tivway Ltd

COMPANIES (AMDT) ACT 1990 S24

COMPANIES (AMDT) ACT 1990 S24(4)

COMPANIES (AMDT) ACT 1990 S24(1)

COMPANIES (AMDT) ACT 1990 S18

COMPANIES (AMDT) ACT 1990 S24(3)

COMPANIES (AMDT) ACT 1990 S25

COMPANIES (AMDT) ACT 1990 S2

COMPANIES (AMDT) ACT 1990 S2(2)

VANTIVE HOLDINGS & ORS, IN RE UNREP SUPREME 11.8.2009 2009 IESC 68

CLARE TEXTILES LTD (IN LIQUIDATION), IN RE 1993 2 IR 213 1992/10/3202

TUSKAR RESOURCES PLC, IN RE 2001 1 IR 668 2001/24/6394

1 Judgment delivered the 4th day of March, 2010 by Denham J.

2 1. This is an appeal by ACC Bank Plc, referred to in this judgment as "ACC", from an order of the High Court (McGovern J.) made on the 16 ^th November, 2009, which confirmed Schemes of Arrangement pursuant to s.24 of the Companies (Amendment) Act, 1990 in respect of the three companies named in the title of this case.

3 2. The three companies are as follows: Tivway Limited, referred to as "Tivway" John J. Fleming Construction Company, referred to as "Construction"; and J.J. Fleming Holdings, referred to as "Holdings".

4 3. ACC filed thirty five specific grounds of appeal. However, this case turns on fundamental issues relating to the nature of an examiner, the jurisdiction of the court, and the purpose of the legislation.

The High Court

5 4. These matters came before the High Court by way of applications under s.24 of the Companies (Amendment) Act, 1990, as amended, referred to in this judgment as "the Act of 1990", for confirmation of Schemes of Arrangement in respect of each of the three companies.

6 5. On the 20 ^th July, 2009 an examiner was appointed to Tivway. On the 21 ^st September, 2009, on the application of the examiner, he was appointed examiner of Construction and Holdings also.

7 6. ACC is a secured creditor of Tivway and for the purposes of the schemes was classed as a contingent creditor of Construction and Holdings. ACC submitted that it should have been classified as an unsecured creditor of these two companies. ACC claims that it is owed approximately €21.5 million.

8 7. The examiner proposed three schemes to the High Court, one for each company, which schemes were supported by the companies and all creditors except for ACC. ACC claimed that the proposals were put forward for an improper purpose and that it would be unfairly prejudiced. It was submitted that there was no reasonable prospect of the survival of Tivway as a going concern. It was submitted that, as regards Construction, the proposals were designed to facilitate the sale of the only profitable asset and that the remaining business would not be a going concern. It was submitted that Holdings was not a going concern. ACC submitted further that it was being treated unfairly, that it was prejudiced, and that the schemes were inequitable within the meaning of s.24(4) of the Act of 1990.

9 8. The learned High Court judge was satisfied that the examiner had classified the creditors correctly, that ACC had not been unfairly prejudiced, and he approved the Schemes subject to a minor modification.

10 9. The learned High Court judge described the Schemes as follows:-

"Under the Schemes, the bank creditors, other than ACC, have entered into a Memorandum of Understanding to develop the integrated Sandyford site over an extended period in cooperation with a legacy business of Construction's undertaking which will continue to trade within Construction in the post-protection period. The banks which are currently funding the activities of Construction will continue to support the trade and undertaking of the development business remaining in the companies in the group into the future. This bank support is conditional on confirmation of the Scheme of Arrangement."

11 In order to put the arguments of the various parties in context, it is useful to set out some of the features of the Schemes as described in the Explanatory Memorandum of the Examiner. In the first place, there will be purchase of business assets by Dunban Limited [ sic]. Dunban [ sic] will purchase the following trading activities of the group, namely:

12 (1) The third party contracting trade and trading assets of Construction.

13 (2) The trade and trading assets of Vision.

14 (3) The trade and trading assets of Fusion.

15 (4) The shareholding of Biomedy Ltd., a subsidiary company of Holdings.

16 (5) The consideration for the purchase of the above consists of the following:

17 (i) Payment of a sum of €3,610,000 to Construction for the trade at (1) above, which monies will be used to discharge the cost of the examinership and provide a dividend pool for the creditors of Construction.

18 (ii) Payment of a sum of €259,900 to Holdings for the shares in Biomedy Ltd., which monies will be used to provide a dividend pool for the creditors of Holdings. A nominal payment of €100 is to be paid to John and Noirin Fleming for the transfer of their shareholding in Biomedy Ltd. to Dunban Limited [ sic].

19 (iii) Payment of a sum of €130,000 to Tivway, a subsidiary company of Construction, which monies will be used to provide a dividend pool for the creditors of Tivway.

20 (iv) Transfer of the employment contracts of the majority of the employees of Construction to Dunban Ltd. [ sic], which will eliminate statutory termination costs (estimated at €1 million) in Construction for those employees and preserve their employment in Dunban Limited [ sic].

21 In addition to the consideration at (5) above, the investor is providing for:

22 (i) Working capital facilities in Dunban Ltd. [ sic] to support the transitioned third party trades of Construction, Fusion and Vision, going forward.

23 (ii) Payment of consideration to both Vision and Fusion for their trade and trading assets.

24 (iii) Transfer of the employment contracts of the employees in Vision and Fusion to Dunban Ltd. [ sic], which eliminate redundancy costs in those companies for those employees and preserve their employment in Dunban Limited [ sic].

25 (iv) Transfer of the third party trading liabilities of Vision and Fusion to Dunban Limited [ sic].

26 The company structure of the group will remain largely the same, with only some amendments such as the sale of shares in Biomedy Limited. The trades carried on in subsidiaries of Holdings and Construction are unaffected by the restructuring and will continue to trade as normal.

27 There will be a preservation of the legacy development's business of Construction in the post-protection period which will be facilitated by a management agreement, a cooperation agreement and bank support.

28 The Schemes involve the creation of a Residual Debt Fund in Construction, Holdings and Tivway to meet residual contingent liabilities.

29 The Schemes provide that it will take up to ten years to determine whether the inter-company accounts and investments in subsidiaries will have any value, as it is anticipated it will take this length of time for the orderly development and realisation of the property work in progress and inter-company balances in each company and the other companies in the group."

30 10. The learned High Court judge addressed the way in which various creditors were categorised. He stated that in the Schemes of Arrangement the examiner treated ACC the same as other bank creditors with guarantees. Having considered the documents in the submissions, the learned High Court judge concluded that the methodology used by the examiner was rational, fair and reasonable.

31 11. The learned High Court judge considered whether or not ACC had been unfairly prejudiced. He held that the examiner was correct in the way in which he classified the creditors, and in particular the classification of ACC.

32 12. The learned High Court judge considered the issue of the protection of jobs. He stated that:-

"The Schemes of Arrangement have as their aim the preservation, not only of the enterprise comprised in the companies, but also 137 jobs which will continue in the event that the proposals are confirmed."

33 13. The learned High Court judge held:-

"In the Schemes of Arrangement which I have to consider, I am told that the jobs of 137 workers will be saved by the Scheme. Under the Scheme, the two discrete business undertakings of Construction, namely, third party contracting business and development projects will be separated. The third party contracting business will be sold to a new investor, Dunban Ltd. [ sic], and the preservation of the development side of the business in Construction as a legacy...